Walmart Stores announced today a number of related events that position the company to leverage its global scale to reduce costs of goods, accelerate speed to market, and improve the quality of products.
Walmart’s new global sourcing strategy involves the creation of Global Merchandising Centers, a change in leadership and structure, and a strategic alliance with Li & Fung, a global sourcing organization.
Today’s announcements, according to Walmart vice chairman Eduardo Castro-Wright, are “important elements in the company’s strategy to deliver even greater value to its customers and shareholders.”
Walmart first announced a consolidated global sourcing structure centered around new Global Merchandising Centers (GMCs) at its annual meeting for the investment community in October. This new structure is expected to leverage the company’s global scale in both general merchandise categories and global food sourcing.
“The newly-established Global Merchandising Centers represent the largest and most important element of our new sourcing strategy,” Castro-Wright said. “These centers will create alignment between sourcing and merchandising and drive efficiencies across various merchandise categories.”
The core of the company’s overall global sourcing strategy will be to continue increasing direct sourcing for the company’s private brands. Today, private brand merchandise represents more than $100 billion in purchasing annually. “Our new strategy and structure should drive significant savings across the supply chain,” Castro-Wright said.
Ed Kolodzieski, currently president and CEO of Walmart Japan Holdings G.K. and Seiyu, has been promoted to executive vice president and will lead Walmart’s Global Sourcing. Kolodzieski will report to Castro-Wright.
As part of this new strategy, Walmart also finalized a series of agreements with Li & Fung. The agreements are non-exclusive and do not include volume or shipment commitments. The strategic alliance between the two companies will allow Walmart to realize the benefits of consolidating a portion of its sourcing portfolio. Li & Fung, which is forming a new company to manage the Walmart account, is expected to build capacity that would enable it to act as a buying agent for goods valued around US$2 billion within the first year.
“In sum, we are redefining how we source products that are imported into Walmart retail markets around the globe,” Castro-Wright said. “By realigning our resources, leveraging our scale, and restructuring our relationship with suppliers, we will enable our businesses around the world to offer even more competitive pricing on merchandise and to provide our customers a clear and compelling assortment of better quality products at lower prices.”